This Wisdom of the Crowd, compiled from responses posted on the Insurance Staff Counsel and Litigation eGroups,* addresses issues related to an insured's ability to select defense counsel under a directors & officers (D&O) or executives & officers (E&O) liability insurance policy.
Insured's Ability to Select Defense Counsel Under D&O and E&O Policies
*(Permission was received from the ACC members quoted below prior to publishing their eGroup comments in this Wisdom of the Crowd resource.)
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Insured's Ability to Select Defense Counsel Under D&O and E&O Policies
Questions:
1.) Does a D&O or E&O carrier typically get to choose defense counsel for the insured or covered party? If so, can there be exceptions or carve-outs?
2.) What if such counsel is not acceptable to the insured or covered party, for whatever reason, including that such counsel is not a "first tier" lawyer or with a "first tier" firm? Can the insured / covered party decline the counsel chosen by the carrier, and if so what happens?
3.) What impacts might reservation of coverage have?
Wisdom of the Crowd
Response #1
In my experience, the answer is driven, in large part, by the terms and conditions of the applicable policy. The exception arises when defense is being afforded under a reservation of rights. In general, and most definitely in New York, a reservation of rights triggers the right of the insured to select counsel of its own choosing. 1
Response #2
My experience (not with D & O or E & O) but with product, general and construction liability cases is that occasionally the carriers have good counsel but more often than not, the counsel they have on their approved panel are not first rate. It does make a lot of sense for you to find a few candidates on your own and see if any of them is on the panel or if the carrier will add any of them to the panel. You could also ask them for the names on their panel and check them out. If you find one on their panel who also does insurance coverage work for the carrier, that will be an indication of quality.
Of course, you should begin by checking your policy. It may give you the right to select counsel. 2
Response #3
I join everyone's comments. A couple of bullet points:
General point: it is all about the money, so everything is negotiable. The insurer gives you panel counsel because they have negotiated a low rate (I had a case where they paid around $200 for a partner).
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The insurer will ordinarily assign counsel since they have a "duty to defend", which is all there is.
You cannot ordinarily object unless there is a good reason: conflict of interest, pending criminal investigation, incompetence (they put a construction firm to defend an SEC case), so the insurer is breaching its duty to defend. However, if you can find own counsel at the same rate (hint: no, you cannot), the insurer ordinarily won't object.
The effect of the reservation is different in different states. As others said, in MA it means you have a right to own counsel. In CA you normally don't. This doesn't mean that you shouldn't take the position that a reservation of rights negates their right to assign counsel. I have had several instances where we negotiated with the insurer to pay an agreed upon rate for our attorneys (e.g., they cover the first 250/hr and we pay the rest, or they cover the first $50K) depending on the amount of contribution to settle the case. Again, the insurers only care for the end result; they have certain ratios and other internal benchmarks. A good relationship with an adjuster usually means you can resolve most issues. 3
1 Rona L. Platt, Chief Legal Officer, The Wright Insurance Group, LLC (Insurance Staff Counsel, Oct. 4, 2012).
2 Adele England, Senior Attorney, NCH Corporation (Litigation, Oct. 8, 2012).
3 PavelBespalko, Counsel, Russian Standard (Litigation, Oct. 8, 2012).